Invoices, E-Way Bills and Bank Payments Prove Purchases: ITAT deletes 100% Disallowance on alleged Bogus Purchase, Limits to 10% [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted 100% disallowance on alleged bogus purchases stating that the purchases were supported by tax invoices, e-way bills, GST returns and payments through banking channels.

The tribunal found that the Assessing Officer ( AO ) failed to examine the detailed documents furnished by the assessee, Nitin Kaher. It limited the disallowance to 10%.

The assessee is an individual engaged in the business of poly packing material, plastic products and allied goods. He challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)].

As for the facts, the assessee reported ₹4.90 lakh in income on his return. Based on information from the Investigation Wing and the insight portal, the case was reopened under Section 147 after a search of the Johnson Watch Group and Kapoor Watch Group revealed that some entities were allegedly involved in providing accommodation entries through shell companies and non-filers.

The Assessing Officer (AO) alleged that the assessee had entered into “high risk transactions” and had made purchases of ₹16,65,340 from M/s Shree Govinda Enterprises, which was identified as a suspicious/entry providing entity.

The AO, in its reassessment order disallowed the deduction of the purchases wholly as unexplained expenditure under Section 69C. Thus, the tax demand was confirmed to be about ₹20.98 lakh. The same was upheld by the CIT(A)-NFAC.

According to the assessee, the purchases were genuine, that the supplier was an active GST registrant and regular return filer, and that all payments were made through bank.

To support the claim, the assessee produced voluminous documentation including the supplier’s name, address and GSTIN/PAN, purchase invoices, e-way bills evidencing movement of goods, ledger account of the supplier, bank statements showing payments, GSTR-2A showing the purchases on the GST portal, GST filing status of the supplier, quantitative stock records, sales details of the goods purchased and sold, and other books and banking records.

The bench of Renu Jauhri (Accountant member) and Mahavir Singn ( Vice president) noted that the assessee had made total purchases of ₹3.53 crore, and the disputed purchases from Shree Govinda Enterprises formed only a small portion.

Also, the Tribunal noted that the goods were recorded in the books, payments were made through banking channels, corresponding sales were offered to tax, and there was no finding that the assessee had made any investment outside the books.

The AO failed to review the documents submitted properly, said the tribunal.

Therefore, the appellate tribunal, considering the facts and documents altogether held that a 100% disallowance of purchases could not be sustained. The bench limited the same to 10%. The appeal was allowed partially.

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